Sportking India Ltd (539221) Q4 FY23 Earnings Concall Transcript

Sportking India Ltd (BSE:539221) Q4 FY23 Earnings Concall dated May. 04, 2023.

Corporate Participants:

Irfan Ryan — Investor Relations

Munish Avasthi — Managing Director

Sandeep Sachdeva — Chief Financial Officer

Analysts:

Manish Ostwal — Nirmal Bang Securities Private Limited — Analyst

Kirthi Chen — Canara HSBC — Analyst

Maulik Charge — Ankara Capital — Analyst

Pritesh Shara — Lucky Investments — Analyst

Surya Narayan — Sunidhi Securities — Analyst

Tushar Gupta — Metal Portfolio — Analyst

Pranav — J&J Holdings — Analyst

Pranav Tendulkar — Rare Enterprises — Analyst

Sanskruti Bole — Voyager Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, Good day, and welcome to the Q4 FY ’23 Earnings Conference Call of Sportking India Limited. [Operator Instructions].

I now hand the conference over to Mr. Irfan Ryan from Orion Capital, Investor Relations partner to Sportking. Thank you, and over to you, sir.

Irfan Ryan — Investor Relations

Thank you, Aman. Good morning, everyone. Myself Irfan Ryan from Orion Capital, we are an investor relation adviser to the company. I hope that all of you and your families are safe and healthy. On behalf of Sportking India Limited, I extend a very warm welcome to all participants on the Q4 and FY ’23 Financial results discussion call. Today on the call, we have Mr. Munish Avasthi, sir, Chairman and Managing Director; Mr. Sandeep Sachdeva, CFO; and Rashim Jindal, Marketing and Raw Material Head. I would like to give a short [Indecipherable] before we start the call. This call may contain some of the forward-looking statements, which are completely based upon our beliefs, opinion and expectation as of today. These statements are not guarantees of our future performance and involve unfortunate risks and uncertainties.

With this, I hand over the call to MD, sir. Over to you, sir. Thank you.

Munish Avasthi — Managing Director

Thank you, Irfan. Thank you so much. Good morning, everyone. This being the main call as [Indecipherable], I welcome everybody to the Earnings Calls. I would like to extend my gratitude to everybody who have taken time to attend the first time earnings call and have constantly been part of the journey of Sportking. Also, I’m pleased to welcome everyone who’s looking at our company for the first time. This being our first call, I would like to speak a little bit about our company. It was established in 1989. Sportking has emerged as one of India’s leading textile contort in one in more than three decades of existence. Sport today owns three state-of-the-art manufacturing facilities in India spread across the state of a which are pipe to the latest mission producing different variety of yards with [Indecipherable] and so on. We are–we have a certain benchmark in quality range and innovation in the domestic as well as international markets. On the eve of our first earnings call, let me move the memory of Mr. Raj Kumar Avasthi, our Chairman, without any vision and the dividend guidance, we would not have been there yet today. We had done a lot of important works in the [Indecipherable] the huge growth of the [Indecipherable] sector, [Indecipherable] encouraged the youth and provided training to the youth by giving them better [Indecipherable].

Along with this, he was always involved in the state and national level textile [Indecipherable], all of us at Sportking do for our mission. Now on to the business front. I’m pleased to announce that despite facing headwinds in the last few quarters, the company has achieved its highest annual quarterly revenue of INR [Indecipherable] crores. The company has successfully commissioned two additional capacity projects in the last one year. The first phase of 4,800 symbols on manufacturing of polyester cotton yarn on the second phase of [Indecipherable] in the end of quarter 4. This has taken overall production capacity of the company to [Indecipherable]. In the last one year, we added almost 35% to our capacity. Not in a way to contribute to the environment and to save cost, we have successfully commissioned a 10-megawatt rooftop solar power project for evolved consumption in quarter two financial year which will lead to a substantial cost savings. On these lines, the Board has also approved the installation of a digital rooftop solar project of about 15 megawatt capacity at the existing units, which is likely to be commissioned in the next 1.5 months. I would like to inform everybody that the projects — all these projects have been before time and within the described budget.

On the industry side, we have been pushing some green shoots in export demand and decline in input cost inflation. There is some better demand from China after long and the loading of premium of domestic cotton over international cotton prices, also some positive indicators that will support our sector in competing internationally. We are yet to sufficient rationalization and raw material input costs and are monitoring it closely. Despite from weakness in global demand, textile sector is going to benefit and she — a lot of actually, transformation with the factors like government push to sign FCA to EU, U.K., China and other countries. The extend part scheme, which is albeit for long term, it’s more positive and long term, but I’m sure it’s one [Indecipherable]. The PLI schemes set to come out with second PLA scheme in consultation with industry to 4% segments, which are not covered in earlier schemes like home textile, etc. The U.S. plan on material coming from Xinjiang region of China, which has been benefiting our success for the last couple of years. I will continue. The economic prices in Pakistan is also — has also helped to stimulate some demand in the last few quarters. A shift of global supply chains amid China plus an states, a lot of factors, which is live and still going on. All these factors lead to improvement in subse–would lead to improvement in subsequent quarters for the company and in less at the [Indecipherable]. We as a company we need to act fast and grab the yield opportunity opening up before changing but accelerate platforms to achieve our growth plans. Now, I’m pleased to welcome Mr. Sandeep Sachdeva, CFO of the company in quarter 4. This appointment is in line with company strategy to achieve accelerated both in the years to come.

I will now hand over the call to Mr. Sandeep Sachdeva, who will take you through the financial performance of the company.

Sandeep Sachdeva — Chief Financial Officer

Thank you, Mr. Avasthi for handing over the call to me, and good morning to everyone. I’m pleased to announce our financial highlights of the financial performance of Sportking Limited for FY ’23 versus quarter-to-quarter. Revenue for [Indecipherable] crores, growth of 2% year-over-year as Mr. Avasthi raises the highest [Indecipherable] in the history of the company. EBITDA for FY ’23 INR [Indecipherable]. For quarter four of FY ’23, revenue increased by 4% on a quarter-to-quarter basis to INR534 crores. EBITDA per quarter two increased by 39% on a quarter-to-quarter basis to INR56 crores. Margin for quarter three increased to 100 basis points to 10%. Profit after taxes for the quarter four by 71% on a quarter-to-quarter basis to INR31 crores. Net cash from operating activities for every INR23 is INR530 crores, up from INR96 crores for the last financial year, ’21, ’22. Also there is substantial [Indecipherable]. Availment of short-term volumes by [Indecipherable] is INR265 crores as a [Indecipherable] compared with last year [Indecipherable].

Thank you all. This is all from my side. We can open floor for that, to question and answer.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]. The first question is from the line of Manish Ostwal from Nirmal Bang Securities Private Limited. Please go ahead.

Manish Ostwal — Nirmal Bang Securities Private Limited — Analyst

Thank you for the opportunity. Good to hear the industry is doing– seeing some recovery in terms of demand and that’s good for the industry and your company in particular. My question on the few– question’s on the performance of the company. So first question, for the full year, sir, what is the volume growth in our business and the average realization for the quarter four and the FY ’23 basis?

Munish Avasthi — Managing Director

So hello, Mr. Manish. So, volume is at — so the production quantity as a whole as a company, for last year, FY ’21, ’22 was 59,855 metric tons, which increased to 61,769 metric tons in the last one year. And the quarter four volume was about 17,390 metric tons vis-a-vis quarter three of this year at 15,761 metric tons. And yes, you also asked about the spread.

Manish Ostwal — Nirmal Bang Securities Private Limited — Analyst

Yes, average realization.

Munish Avasthi — Managing Director

Average realization for last year, the price per KG last year, what we got was INR312, 62% for all the yards we may put together.

Manish Ostwal — Nirmal Bang Securities Private Limited — Analyst

Okay. And versus quarter four, sir, quarter four of the current every quarter?

Munish Avasthi — Managing Director

The quarter four is INR260, 86%.

Manish Ostwal — Nirmal Bang Securities Private Limited — Analyst

Okay. Sir, we are hearing from the industry that the Europe market has recovered meaningfully. So can you comment some of your key export market where you see the grids in terms of demand and how do you see the overall volume growth because our capacity also just comment, so you talked about in the press release that will benefit to the sales in the coming quarters. So how do you see the overall growth of the business the next financial year, FY ’24?

Munish Avasthi — Managing Director

Overall, the demand is definitely not back to the levels we had one year back. We are still yet to see the European and American demand to come back to the levels which were there before one year. I think there has been a lot of destocking, which has been happening and it’s still going on. But again, there have been some benefits which happened specifically to the mean cost industry of competing nations are having some problems. So I would say an Indian market being substantially better than what it was doing last year, in last couple of years. But we see destocking period, I mean at its end. And we expect when we talk to all our buyers who have been suppliers to U.S. and the Western countries is that the recovery destocking period, which has been painful for the last one year, that is staggering, and we should see the demand really to get you up in next three to four months.

Manish Ostwal — Nirmal Bang Securities Private Limited — Analyst

Sir, on the raw material cost basket. So one is we have seen some decline in the raw material cotton prices. So how do you see the raw material scenario playing out and the operating margin trajectory for FY ’24?

Munish Avasthi — Managing Director

Yes, raw material actually has been the most painful part of the textile companies as of two stand reasons. One is cost in the last continue, we ended up with very small closing stock of cotton was drop at in last year. Second has been imposition of import decree, which has been imposed of 10%, which has made our company relatively more expensive than what it used to be in the last three, four years. So a premium of Indian cotton has gone up than what it used to be. So these two factors have been playing out. So relatively reason cotton are still higher than what they should be, but I think one factor, which is the closing stock is going to take care itself because we see the drop the share is pretty good and it’s coming slow because of the farmers administrate, because it’s got much higher prices last year. But we expect the raw metal prices to be weak,stable or lower than where they are say. And I think this will start to positively impacting our margins in the next four to five months.

Manish Ostwal — Nirmal Bang Securities Private Limited — Analyst

Any number, specific guidance for that, sir? Or you don’t have any guidance on operating margins?

Munish Avasthi — Managing Director

Operated margins, we think it’s very difficult to give me that figure, but we think that we have hit the bottom in the last couple of quarters and there will be some improvement going forward. Albeit, I don’t expect it to be very fast for like a couple of quarters. [Indecipherable]

Manish Ostwal — Nirmal Bang Securities Private Limited — Analyst

Sure, sir. I appreciate the answer. And the last data point on the capex for the FY ’24, what is our capex spending for the ’24?

Munish Avasthi — Managing Director

I mean our capex plan mining will be not much. There’s some money which employs the solar plant, which is, I think, 50% of it is already doing spent. So I think around, we find tranche and whatever is needed for updating of plants and everything. I think below INR50.

Manish Ostwal — Nirmal Bang Securities Private Limited — Analyst

Okay. And average cost of debt, sir?

Munish Avasthi — Managing Director

Average cost of debt right now is about 5%.

Manish Ostwal — Nirmal Bang Securities Private Limited — Analyst

5% – 7%. Sir, I have one basic question on your recent buyback program. So why we have done the buyback when we have debt on the balance sheet. Was reducing debt is a more prudent strategy for the company in the long run than during the buyback? Any thought on that, it will be grateful. Thank you for answering all the questions.

Munish Avasthi — Managing Director

So we think we have substantial inflows coming in subsequent quarters and subsequent years. And we had — and I think the shareholders have been pretty patient with us for last [Indecipherable] years. We haven’t given any dividend. So we thought this is the right time to reward the shareholders with the buyback program. And our debt and our debt equity ratios were pretty comfortable and below 0.5 for us to afford it. Thank you.

Operator

Thank you. The next question is from the line of Kirthi Chen from Canara HSBC. Please go ahead.

Kirthi Chen — Canara HSBC — Analyst

Thanks a lot for the opportunity, sir. First of all, congratulations for this buyback. And also, we have seen a very good OCF. You have done an OCF of more than 500, good to see that. And also congratulations that you have almost increased our capacity by 50 percentage. So my congratulations to that also. Sir, my first question is on the volume, sir. Like you had highlighted, we had done this quarter 17,400 tons roughly. So at peak, what can be the volume with the expanded capacity? Now we have installed 60,000 spindles additionally also. So all put together on a quarterly run rate basis, what could be our run rate, sir?

Munish Avasthi — Managing Director

Thank you, Kirthi. Thank you for the compliments. The last expansion is we take a couple of months to totally ramp up through the key capacity. So we expect our run rate some 17,390 tons to increase to around 22,000 metric tons. Maybe 1,500 or 21,000 something [Indecipherable]

Kirthi Chen — Canara HSBC — Analyst

Okay. So sir, in this quarter, sir, our utilization, excluding the new plant is full sir, this quarter?

Munish Avasthi — Managing Director

Yes, if it’s fully we have our last quarter, our capacity utilization was about 96% sorry, 97.3%.

Kirthi Chen — Canara HSBC — Analyst

Okay. Sir, out of the total power consumed, how much is our capitive generation, sir, currently?

Munish Avasthi — Managing Director

So currently, the captive generation is around I think, 6% to 7% which is going to go up to around after this new plant is already which has also come in, should be around 11% to 12% of [Indecipherable] advance.

Kirthi Chen — Canara HSBC — Analyst

Okay. Sir, how much is state policy allows, sir, state policy captively how much makeup captively as a proportion to our requirement?

Munish Avasthi — Managing Director

I can take up of 100%. There is no cap this being solar, so the efficiency is only 17%, 16%, 17% because we only generate it in the models.

Kirthi Chen — Canara HSBC — Analyst

Correct. Correct. Okay. So maximum, we can take up to 18% of our requirement, we can take up correct, sir, then?

Munish Avasthi — Managing Director

There is no bar from the state but as the capacity of routes we had. So we have only put out whatever route we have.

Kirthi Chen — Canara HSBC — Analyst

Okay. But we can’t put in a private side, sir, these plants?

Munish Avasthi — Managing Director

We can’t say that we don’t– we can put up the man that’s running the within the same campus, we can put it on the land, but we don’t see a big advantage also, because we have to buy land [Indecipherable].

Kirthi Chen — Canara HSBC — Analyst

Okay. Sir, apart from this rooftop capex, any capex planned in the coming year, sir?

Munish Avasthi — Managing Director

No, so nothing for additional capacity expenses, just more monetization and agitation, we tend be happening.

Kirthi Chen — Canara HSBC — Analyst

Okay. So next capex, when will we be planning, sir?

Munish Avasthi — Managing Director

So we have just finished off with 40% distal capacity expansion in the last one year. So we are just taking a breath and evaluating the market conditions, and so I think I believe premature for me to comment on that. We have not yet decided. This time to consolidated last [Indecipherable].

Operator

Thank you, Mr. Kirthi Chen, request you to join the queue for any follow-up. Our next question is from the line of Maulik Charge from Ankara Capital. Please go ahead.

Maulik Charge — Ankara Capital — Analyst

Hello, sir. Am I audible?

Operator

Yes, you’re audible.

Maulik Charge — Ankara Capital — Analyst

Okay, sir. Thank you for giving me the opportunity. Sir, I have a couple of questions. The first one, the new capacity expansion that has been commissioned. Will the capacity utilization be more than 90% from the get-go? Or will it be in the phases?

Munish Avasthi — Managing Director

So sir, typically, in a spinning company, it takes about three months to reach the peak levels, which is around 98%. And I think that would be the case in this. So right now, we have just started. So I think by June end, we set to 98%.

Maulik Charge — Ankara Capital — Analyst

Okay, sir. Thank you. The second question will be, we are seeing a lot of initiatives from the government to uplift and to provide that extra sector of opportunities to make it completely worldwide. How does Sportking plan on seizing this opportunity?

Munish Avasthi — Managing Director

So we are very excited and bullish on the textile sector. And we think the government is also being a lot and we — that’s why we have put up this capacity in the last one year, you know almost doubling on the best last year. And we are ready to see the opportunity and we are looking at any more opportunities we get going forward after consolidating this part.

Maulik Charge — Ankara Capital — Analyst

Okay. Thank you, sir. I don’t have anymore questions.

Operator

Thank you. The next question is from the line of Pritesh Shara from Lucky Investments Manager. Please go ahead.

Pritesh Shara — Lucky Investments — Analyst

Sir, did you mention that you will fully utilize the capacity of it and to record 21,000 tonne volume by quarter two, that’s what you mentioned?

Munish Avasthi — Managing Director

Yes. I think that’s what we go over.

Pritesh Shara — Lucky Investments — Analyst

Okay. My second question is, sir, if you could help us and give what was the per main cotton cost for FY ’23 and what was the exit of quarter 4? And what was the spread given the realization but what was the spread for FY ’23? And what was the exit for quarter four FY ’23?

Munish Avasthi — Managing Director

Okay. And so on the raw material prices for the whole year, this– So for the auto specifically was INR202 for the whole year last year, and 185 20 for the blend for everything we put together. And quarter four, the quarterly prices had moderated to INR179 rupees and overall INR163 and even 51%.

Pritesh Shara — Lucky Investments — Analyst

179 and 163.

Munish Avasthi — Managing Director

Yes.

Pritesh Shara — Lucky Investments — Analyst

Quarter 4. Okay. So I will get the spreads in this INR260 minus INR160, INR100 spread for exit quarter. And full year is INR140 rupees spread, right?

Munish Avasthi — Managing Director

No, the full year is around INR127 rupees for 50%. And last quarter is INR97 rupees 34%.

Pritesh Shara — Lucky Investments — Analyst

All right, 100 rupees, okay. And if you could give us the bale price or the candy price for cotton exit?

Munish Avasthi — Managing Director

Cotton prices as of today or for the last quarter?

Pritesh Shara — Lucky Investments — Analyst

No, for the exit. Exit. Is it 64,000?

Munish Avasthi — Managing Director

Just up to 179 and — it’s around INR63,600.

Pritesh Shara — Lucky Investments — Analyst

Okay. And this will remain until the next cotton season, right, because you would have procured your cotton.

Munish Avasthi — Managing Director

No, we haven’t procured on cotton as yet, but it will be a bit lower than this.

Pritesh Shara — Lucky Investments — Analyst

Okay. And my last question is for this capacity that you expanded the 60,000 spindle and 40,000 spindle. What was the capex cost per spindle? And was this on brownfield?

Munish Avasthi — Managing Director

Yes, it was all brownfield that capex cost per spindle — for first 40,000, it was around INR40,000 rupees per spindle and the last one in the–

Pritesh Shara — Lucky Investments — Analyst

[Indecipherable], sir.

Munish Avasthi — Managing Director

And the second one is around 48,000.

Pritesh Shara — Lucky Investments — Analyst

Okay. And if you are to do a greenfield, then what is the cost that comes in?

Munish Avasthi — Managing Director

I think it will be about 10% to 15% higher, maybe 10% higher.

Pritesh Shara — Lucky Investments — Analyst

10% higher. So basically, about 50,000 rupees 50,000, 55,000.

Munish Avasthi — Managing Director

Yes, I think so.

Pritesh Shara — Lucky Investments — Analyst

Okay. Thank you very much, sir, and all the best. Thank you.

Operator

Thank you. The next question is from the line of Surya Narayan from Sunidhi Securities. Please go ahead.

Surya Narayan — Sunidhi Securities — Analyst

Yeah.

Operator

Surya Narayan, your line is muted. Please proceed with the question.

Surya Narayan — Sunidhi Securities — Analyst

Yes. Is it audible now?

Operator

Yes.

Surya Narayan — Sunidhi Securities — Analyst

Yes. So sir, Malissia — thank you for giving me the opportunity. Just to understand from your scheme of things, that are you interested to be only in the string in the upstream and not into midstream or downstream, that is number one question. Number two, is that out of the total land, in terms of fiber, what is the cotton and what is the manual driver? I’ll then ask other questions.

Munish Avasthi — Managing Director

So you see the proportion of only 100 an is almost 50% as of today.

Surya Narayan — Sunidhi Securities — Analyst

Pardon, sir. Hello.

Munish Avasthi — Managing Director

The proportion of cotton in our sales is almost 50% more than–

Surya Narayan — Sunidhi Securities — Analyst

50%?

Munish Avasthi — Managing Director

Yes, 52%.

Surya Narayan — Sunidhi Securities — Analyst

Okay.

Munish Avasthi — Managing Director

And the cotton blended bears another another 40%, and the synthetics is about 10%. That is for the quarter 4. In the next year, I think the cotton proportion will increase a little bit more with the new capacity kicking in the second quarter. And your second question — your first question was about the downstream. So we are very — I think we are very excited about the stilling sector. And we think that a lot of option spending sectors right now — and there are many things which we don’t do what we want to do. So right now, we don’t have any plans to go downstream — but we keep on looking at all the scenarios and all the opportunities. And as and when something excites us more than [Indecipherable]

Surya Narayan — Sunidhi Securities — Analyst

Okay. And on the — you make a lot of value in an like loans and even the guidance males but your realization is very low at around — you stated around 60 or so. So I mean, can you explain why the

Munish Avasthi — Managing Director

This includes actually some low ran basis the average comes lower, but we — so I think we are mainly into port counts. We make from down 8% to 40-ish. — that also might put our total utilization at a lower level. So that might be the reason.

Surya Narayan — Sunidhi Securities — Analyst

Okay. So one thing, actually, can we expect a change from the company from presentation Vito quarter-on-quarter because you are totally often focused. So is it possible to give data points with regard to the cotton and manned and those also related to different fancies and gender runs. So is it possible to be further we can be able to understand the trajectory of the realization quarter-on-quarter and what is happening globally or in your case. So that is my viewpoint.

Munish Avasthi — Managing Director

Well, thank you for the connection. We will look into it and — so whichever are our substantial areas we would look at the porting separately. — the presentation.

Operator

Thank you. Mr. Nayak, requesting you to join queue for any follow-up as we have set participants waiting for their turn. We have the next question from the line of Tushar Gupta from Metal Portfolio. Please go ahead.

Tushar Gupta — Metal Portfolio — Analyst

Thank you, sir, for having me. I think majority of my questions have been asked by my friend

Operator

Tushar, may I request you to use your handset please, your voice is not very clear.

Tushar Gupta — Metal Portfolio — Analyst

Hello, is it better?

Operator

Yes.

Tushar Gupta — Metal Portfolio — Analyst

Yes. So thank you for having me. I think majority of my questions have been asked by my peers from the industry. Just a couple from my side. I understand there’s the electricity subsidy that we get on our Bhatinda plant, I just want to understand till when are we getting that subsidy? And once that goes off? How will the profit get impacted?

Munish Avasthi — Managing Director

Okay. That’s actually going to be with us for next years. I think in 2022.

Tushar Gupta — Metal Portfolio — Analyst

22. Okay. Okay. My next question is on the dividend policy. Do we have any plans on establishing a uniform dividend policy in the future? I understand there’s no as of now, but what are your plans for future

Munish Avasthi — Managing Director

So right now, we started — we have a dividend policy, which is [Indecipherable]. So right now it now, we haven’t given any dividend. The only thing which we did this year was shared by the — we are looking at — we don’t have any growth plans being a growing company, other have funds to deepen because just concentrating on the growth. But the next couple of — next year, there we see an opportunity that in the end or the back we would definitely do it if it is growth and are not there.

Tushar Gupta — Metal Portfolio — Analyst

Okay. Understood, sir. We understand that there are some headwinds from the export market that — because of the Ukraine and Russia war. In the meanwhile, do we plan any exploring any other markets for exports? — any other country or any other reason that we have in our pipeline of exploring?

Munish Avasthi — Managing Director

So we don’t directly export to Russia or trans and we almost export to 100 countries and we keep this is our ongoing site keep on finding new buyers and new markets almost every day and every month. This is our endeavor. So that’s a very make keeps on going on.

Tushar Gupta — Metal Portfolio — Analyst

Okay. Understood. Last thing I want to ask is, and what would be the — what is the vision for next two, three years that you have what markets we think that we may enter any specific product? What could be the revenue and the bottom line which you can predict for next two, three years? I understand it to be able to achieve that or not. Just I want to understand the target that you have in your mind.

Munish Avasthi — Managing Director

Sorry, right now, or it’s very difficult for monogenetic but are endeavoring to grow to keep on growing and whenever we see an opportunity and maintaining our debt levels, not exceeding the mean the aroma — so we keep our exporting opportunity. We have many projects in mind. So once we stabilize this utilization capacity, which we have done in the last six to eight months, will definitely go ahead with those executing those plans.

Operator

Thank you. [Operator Instructions] The next question is from the line of Pranav [Phonetic] from J&J Holdings. Please go ahead.

Pranav — J&J Holdings — Analyst

Good morning, sir. Thank you for this opportunity and many thanks for this call, a call — thank you so much. Sure. My first question is your quarter inventory, which is on March seems to be in the range of about two, 2.5 months, which historically is lower than normally what our company hold — any view on that?

Munish Avasthi — Managing Director

Yes. There’s actually this year, the cotton arrival pattern has been totally different than historically, it has never happened. The farmers are selling because last year was a historic year in terms of prices this year, since the beginning, the farmers have been resisting to get gotten in the same manner and bigger they used to do last year. So the most important reason for us to always be having more content stock on 31st March was to have to secure the quality cotton, which we need to serve our customers. This year, I think that the pattern has changed, but still, I think around 40% of the cost rises if you talk about 31st March, I think 50% of the drop was still yet to come. So we have to change the buying cycle according to the parameters.

Pranav — J&J Holdings — Analyst

So basically, you’re anticipating lower cotton prices?

Munish Avasthi — Managing Director

Yes.We– lower or making stable to lower

Pranav — J&J Holdings — Analyst

Okay. Sir, my next question is seeing your cash flows and no large major capex in FY ’24, what will your debt look like at the end of ’24?

Sandeep Sachdeva — Chief Financial Officer

Short-term debt should be — I think even with this expanding capacity, it should be in the same range or even lower. And I think our long-term rate should go down by around INR70 crores or maybe INR100 crores.

Operator

You — the next question is from the line of Pranav Tendulkar from Rare Enterprises.

Pranav Tendulkar — Rare Enterprises — Analyst

Sorry, I missed this data. What was the volume for whole year in the quarter — and what is the expected volume because of the increased capacity for next year? That is the first question. And what is the realization? Average realization I understand is 312 and 260 for the last year and current quarter. If I’m right, then please also let me know what is the average realization expected for the next year expectation. — also volume expected for the next year.

Munish Avasthi — Managing Director

Volume for last year is INR61,77069. — and for quarter four is about 7,390 metric tons. This, we expect to go up to 21,000 plus from are of this financial year. And so we should see I think around 910,000, 80,000 metric tons plus minus 5% for the whole financial year 2024. And average utilization was INR97, INR34, the spread was INR97 34% for last last quarter. And we expect the margins on the spreads to the name where they are for the next couple of quarters will improve a little — and it’s too early for me to give some picture of what’s going to happen after that. I hope this answers

Pranav Tendulkar — Rare Enterprises — Analyst

Right, sir. Right, Sir, just a last question from my side. You alluded that the inventory destocking cycle is over. So will it stabilized at a lower base as compared to, say, last two, three years ago, last two, three years was an abnormal year.

Munish Avasthi — Managing Director

Yes. I think the stocking and a I think we soothing generally start getting orders from August and September. — the things should be better. Let’s say, last two, three years were very abnormal because of many reasons, much higher demand and a lot of supply chain issues — so I think definitely what the stocking period is the stocking inventory is going to be less than what it was in the last two years. the supply chains are in a much better situation right and the target period to countries is not what it is in last few years. I think we’ll come back to what used to be epoetin, think, in the next six months.

Pranav Tendulkar — Rare Enterprises — Analyst

Perfect. Perfect. Sir, just last question from my side. In the products that you procure, who are your toughest competitors? And how is competitive scenario unfolding? That’s my last question. And congratulations on an improving set of numbers.

Munish Avasthi — Managing Director

I think you couldn’t get the raw material consumer In the end product that we produce who are our toughest competitors? And how is the competition evolving? So that is the first question. And also you could

Pranav Tendulkar — Rare Enterprises — Analyst

Yes.

Munish Avasthi — Managing Director

I think all the new selling loads are there. I think it’s not about complacency. The whole world is a competition. India is is the biggest exporter. So I think it’s just demand and supply, which is the biggest problem or it is starting last 16 months. Competition composition is not that big a problem — so there is no — nothing tough or not to about that.

Pranav Tendulkar — Rare Enterprises — Analyst

Correct. Correct

Operator

Next question is from the line of Sanskruti Bole from Voyager Capital.

Sanskruti Bole — Voyager Capital — Analyst

Yes.You talked about the companies are anticipating a reduction in cotton prices, right? So I wanted to ask how will like the forecast that are talking about lesser rainfall this year — and if some were as well, like how do you think that will affect margins? And is there anything in place that we have done to like mitigate that?

Munish Avasthi — Managing Director

So we are expecting lower low prices or stable prices from where they are. And we do not expect — we expect good showing numbers for next year, and we expect we will have another good crop year next. So we don’t need to do anything. I think it’s national fiber and the time in there how the weather and cotton historically is one of the most resistant fiber to the rare of weather — so we are hoping and we are pretty confident that the showing numbers are going to be good for next year, and we’re going to have another good growth next year.

Sanskruti Bole — Voyager Capital — Analyst

Okay. All right. And I had one more question about like raw materials like sourcing, like where do we procure it from like from what I remember reading like the raw material for polyester is mostly imported and everything so like do we just buy polyester and cotton — or do we have anything in line?

Sandeep Sachdeva — Chief Financial Officer

Yes. I’m

Munish Avasthi — Managing Director

We don’t buy any ester from international markets. 100% polyester from domestic suppliers. In cotton, we source some from within India and from international markets also for specific departments

Sandeep Sachdeva — Chief Financial Officer

Yes.

Sanskruti Bole — Voyager Capital — Analyst

Okay. That’s all from my side.

Operator

Thank you. The next question is from the line of Namit Mehta from KC Capital.

Namit Mehta — KC Capital — Analyst

A couple of questions from my side. First, where we stand from an operating efficiency perspective, versus competition. And to the extent possible, if you can talk about the large cost items and where we stand on those cost items versus industry, where do we do better where is there room for improvement? I think that anything helpful.

Munish Avasthi — Managing Director

Yes, operating efficiency last year was around 96%, which I think will be among the top in the industry. then a lot of industry has gone for 50% to 60% capacity cuts. So we could still maintain a 96% operating rate in ends year. This is a testament to our efficiency. Last quarter, we did 97.4%, and we are starting more our target is investing this is about 98%. So we’re timing for that. So yes, I think we are almost there at the top end of the efficiencies

Namit Mehta — KC Capital — Analyst

Sorry if I can just sort of elation what I meant. I meant more at the lines of cost items. So in terms of labor, in terms of power, in terms of other costs. Where do we lie on a, I don’t know, on a per 3G basis or however you typically benchmark these 30 peers, where do we live with vis-a-vis competition?

Munish Avasthi — Managing Director

I think we are pretty competitive, but I think we are amongst of all these aspects with our the boron cost and the Sabeco for tens or anything that is one-off on our USPs we are one of the most traction companies in the country are much inning. One help which comes to ourselves because we got 90% of our capacity is at one location. So that helps us some controlling our costs. And we have power cost like in Puna power is relatively cheaper than other states and because of our own capital, that makes us a pretty connecting our power costs. We can send you a comparison with other some companies off site.

Operator

Thank you. The next question is from the line of Kathy [Phonetic] from Suyash Advisors.

Kathy — Suyash Advisors — Analyst

Hi good morning. Thanks for the opportunity. Wanted to understand your current exposure to Bangladesh and the kind of challenges you are seeing over there?

Sandeep Sachdeva — Chief Financial Officer

Sorry, I didn’t get your question. Exposure to Bangladesh and?

Kathy — Suyash Advisors — Analyst

The challenges you are facing there. I heard of some issues related to LCs and so on for some customers at least, I wanted to understand your current understanding.

Sandeep Sachdeva — Chief Financial Officer

So Bangladesh continues to be our number one destination for our exports. And we are not taking any challenges as such. We have been dealing in a is for many times. And we are not taking any balances challenges. I think this is some other sectors other than yarns challenges. But yarn is backed by Master LC and Bangladesh. So there in yarn specifically, I don’t think so any comfort this.

Kathy — Suyash Advisors — Analyst

Sure. And what percentage would you be exporting to Bangladesh of your total volumes?

Sandeep Sachdeva — Chief Financial Officer

It varies from, so it’s almost a big in.

Operator

I’m sorry, the wise was not clear.

Sandeep Sachdeva — Chief Financial Officer

It’s almost 50% of our exports, it may keep on varying by 10%. That’s minus and it varies from 40% to 60%.

Kathy — Suyash Advisors — Analyst

Thank you.

Operator

Thank you. The next question is from the line of Pratik Gandhi from Samara Capital. Please go ahead.

Pratik Gandhi — Samara Capital — Analyst

Sir, how much additional savings that you foresee for the additional 15 megawatts to plant?

Sandeep Sachdeva — Chief Financial Officer

So we see the total project cost of this stock was around all of.

Pratik Gandhi — Samara Capital — Analyst

How much sir? I could not hear you.

Sandeep Sachdeva — Chief Financial Officer

INR55 crores, INR55 crores.

Operator

Thank you. Next question is from the line of Ishal Sagar from MAPL Value Investing Fund. Please go ahead.

Ishal Sagar — MAPL Value Investing Fund — Analyst

Improving results. So I have two questions. The first one is on our blended realization. So, like you mentioned that you don’t also go into downstream product. You want to make the current operations more efficient and get into maybe better products. So, what are we doing to go into more value-added products? Or if you can talk about some initiatives on that perspective because that will ultimately help to increase our per kg realization

Sandeep Sachdeva — Chief Financial Officer

So see, right now, the profile we have is there is a limitation for us to add value than what we are right now. But we have some plans in mind which might take shape in the next one where we would add substantially to our portion of value-added yards in our plan.

Ishal Sagar — MAPL Value Investing Fund — Analyst

So what are our value-added proportion right now?

Sandeep Sachdeva — Chief Financial Officer

Right now, it’s around 10% to 15%, not much.

Ishal Sagar — MAPL Value Investing Fund — Analyst

So there is scope then is this what you are saying?

Sandeep Sachdeva — Chief Financial Officer

Yes, yes. We are looking at onwards can be bad. So hopefully, after the next financial year, there’ll be a constant increase in the value-added share in it.

Ishal Sagar — MAPL Value Investing Fund — Analyst

Got it. My second question is on the depreciation. So how much is the depreciation supposed to go up like since you have commercialized this expansion? So from next quarter, how much will the expenses for depreciation

Sandeep Sachdeva — Chief Financial Officer

And depreciation in this quarter was around INR14 crores. So I think it would be around INR15 crores for most quarter.

Ishal Sagar — MAPL Value Investing Fund — Analyst

Sorry, I could not catch you?

Sandeep Sachdeva — Chief Financial Officer

About INR15 crores from next quarter.

Ishal Sagar — MAPL Value Investing Fund — Analyst

INR15 crores. Okay. Also, my final question is on power and other costs, which was roughly about 12% of our top line in last quarters. So, is there any cost component is it still elevated? Or can it go down? So, going ahead with higher capacity utilization, do you see other costs as a proportion coming down to our sales figures?

Sandeep Sachdeva — Chief Financial Officer

See, yes, it’s very difficult to go by merchant ages because the price of yarn keeps on going up and down as last year, in the same quarter, turnover was much higher, and our volumes were lower. And our power cost was as a percentage of lower I would say that our power cost will stay the same or go a little lower in absolute terms other than the new project because of the addition of the solar power from second quarter this year. We don’t see anything because power costs are also increasing every year increase, we buy from SD and the increase every year and this year also there be some increase. So, what we see is that by putting up the solar, we will be mitigating those impacts on be able to keep this steady as where we are.

Operator

Thank you. Ladies and gentlemen, this is a positive time, that would be our last question for today. I now hand the conference over to the management for their closing remarks. Thank you, and over to you.

Sandeep Sachdeva — Chief Financial Officer

Thank you so much. Thank you to all. I think I would like to thank the participants for taking all the time to join our first call. We look forward to having continuous engagement with all the market participants. For any other queries, we would connect the Dorian capital or advisers, and we can dive to us directly also. Thank you so much.

Operator

[Operator Closing Remarks]